The rise and fall of garment firm Garmex Saigon

From a peak of nearly 4,000 employees and revenues of over VND2 trillion ($82 million), textile firm Garmex Saigon has slipped to no orders and just 35 personnel.

This happened in just five years and the Ho Chi Minh City-based company is liquidating assets now.

Garmex Saigon was established in 1976, equitized in 2004, and listed on the Ho Chi Minh Stock Exchange (HoSE) as GMC in 2006.

After equitization, business grew steadily, with revenue and profit rising from VND124 billion and VND7.7 billion in 2004 to the respective peaks of VND2,038 billion ($83.65 million) and VND121 billion ($4.97 million) in 2018.

The slide began soon after, with shrinking export orders. One of the reasons was that the company did not keep up with supply chain development trends and meet proof of origin requirements that trade agreements required.

From specializing in exports, the company shifted to taking orders outsourced by domestic firms. In 2021, when export revenues plunged 48% year-on-year, it used two factories to work for domestic firms.

The change robbed Garmex Saigon of its resilience. When there was a sudden decrease in demand from the second half of 2022, with plummeting textile and garment orders from main markets like the U.S. and EU, the company's export orders fell 93% and outsourced work stagnated starting in August.

Increasing inventory forced it to cut costs even further.

Zero orders

In 2023, Garmex Saigon did not get a single order. With revenues of just VND8 billion ($328,400), the number of employees plunged from nearly 4,000 at the end of 2021 to just 35. It suffered consecutive losses of VND85 billion ($3.49 million) and VND52 billion ($2.13 million) in 2022 and 2023, respectively.

At the end of 2023, Garmex Saigon leaders assessed that the textile and garment industry had not seen major changes with low demand in the U.S. and European markets.

Therefore, the company made no plans to recruit workers. In fact, right from the first month of 2023, the management board negotiated with workers to reduce salaries and cut costs. It focused on selling inventory and transferring assets. The firm’s leaders said that the valuation of machinery and equipment at Tan My and Quang Nam factories has been completed.

The leadership also determined that the company should look at other businesses. The company added business lines related to warehousing, storage and transport services.

Last year, Garmex Saigon made its only new investment in Phu My Group for a 1.5-hectare housing project.

In August 2023, the company's board of directors agreed to increase capital contribution to Phu My Group from VND18.2 billion to VND29.6 billion ($1.21 million), maintaining an ownership ratio of 32.47% when the group increased its charter capital to VND91.1 billion ($3.74 million).

Outsourcing problems

Garmex Saigon's plight was not just rooted in the general difficulties facing the textile industry, but also related to its taking on work for Gilimex (HoSE: GIL).

Gilimex owned a 25% stake in Gia Dinh Textile and Garment Corporation, which held more than 10% of Garmex Saigon’s capital. In 2018, two leaders of Gilimex - chairman Le Hung and board member Nguyen Viet Cuong - were elected to the board of directors of Garmex Saigon as ownership representatives of Gia Dinh Textile and Garment Corporation. Le Hung also served as CEO of Garmex Saigon.

When e-commerce boomed (2020-2021), Gilimex expanded its scale to fulfil huge orders from main customers like Amazon and IKEA. During the period, Gilimex purchased GMC shares to become a major shareholder at Garmex Saigon with a 7.09% stake.

At that time, Garmex Saigon became an outsourcing partner for Gilimex, and both businesses benefitted from Amazon orders.

However, in the second quarter of 2022, Amazon suddenly reduced orders, causing Gilimex's revenue to plunge by up to 80%, affecting Garmex Saigon badly as well.

At the end of 2023, the company's inventory had an original value of VND126 billion ($5.17 million), of which up to VND100 billion was related to work outsourced by Gilimex.

Currently, Gilimex has withdrawn capital from Gia Dinh Textile and Garment Corporation, but still maintains its stake in Garmex Saigon.

On the other hand, Gia Dinh Textile and Garment Corporation looked to divest its entire stake in Garmex Saigon, registering to sell 3.3 million GMC shares, or a 10% stake.

However, Gia Dinh’s divestment effort was not successful, and GMC shares have hovered around VND8,000-9,000 ($0.37) per share over the past three months.

At the end of 2023, Garmex Saigon had total assets of VND419 billion ($17.19 million), down more than VND100 billion ($4.1 million) from the beginning of the year.

GMC closed Tuesday’s trading session at VND8,900 ($0.37) per share.